What Is Green Banking?

A green bank (sometimes referred to as green investment bank, clean energy finance authority,
or clean energy finance corporation) is a financial institution, typically public or quasi-public,
that uses innovative financing techniques and market development tools in partnership with the
private sector to accelerate deployment of clean energy technologies. Green banks use public
funds to leverage private investment in clean energy technologies that, despite being
commercially viable, have struggled to establish a widespread presence in consumer markets.
Green banks seek to reduce energy costs for ratepayers, stimulate private sector investment and
economic activity, and expedite the transition to a low-carbon economy.

Green Banking is like a normal bank, which considers all the social and environmental/
ecological factors with an aim to protect the environment and conserve natural resources. It is
also called as an ethical bank or a sustainable bank. They are controlled by the same authorities
but with an additional agenda toward taking care of the Earth's environment/ habitats/ resources.

Benefits of Green Banking?

 Basically, Ethical banking avoids as much paper work as possible and rely on
online/electronic transactions for processing so that you get green credit cards and green
mortgages. Less paperwork means less cutting of trees.

 Creating awareness to business people about environmental and social responsibility

enabling them to do an environmental friendly business practice.

 Use of online banking instead of branch banking saves time.

 Green banks adopt and implement environmental standards for lending, which is really a
proactive idea that would enable eco-friendly business practices which would benefit our
future generations.

 When you are awarded with a loan, the interest of that loan is comparatively less with
normal banks because ethical banks give more importance to environmental friendly
 factors - ecological gains. Natural resources conservation is also one of the underlying
principles in a green bank while assessing capital/operating loans to extracting/industrial
business sector.

Role of Central Bank in Implementation of Green Banking

The central bank of Bangladesh has issued policy guidelines for green banking aiming to protect
environmental degradation and ensure sustainable banking practices, officials said. “Green
banking policy needs to be covered through a timeframe which will be segregated into three
phases,” the Bangladesh Bank (BB), the country’s central bank, said in its guidelines, issued on
Sunday. The guidelines would be implemented during the period between December 31 this year
and December 31, 2013 in three phases. Under the guidelines, the banks will formulate and adopt
broad environmental or green banking policy and strategy approved by their boards of directors.

A high-powered committee comprising directors from the board in case of scheduled

Bangladeshi banks and a high-powered committee comprising regional chiefs of global offices
and members from the top management including CEOs in case of foreign banks should be
responsible for reviewing the banks’ environmental policies, strategies and programs.

The banks will approve a considerable fund in their annual budget allocation for green banking.
“Banks shall comply with the instructions stipulated in the detailed guidelines on environmental
risk management (ERM) in consideration of a part of the green banking policy,” the guideline
said, adding that the banks will incorporate environmental and climate change risk as part of the
existing credit risk methodology prescribed to assess a prospective borrower.

The guidelines also said the banks should take steps to save energy from corporate business
travel and encourage employees to purchase energy- efficient cars (that consume less fuel) that
can reduce gas and petroleum consumption.

“Eco-friendly business activities and energy efficient industries will be given preference in
financing by banks. Environmental infrastructure such as renewable energy projects, clean water
supply projects, waste water treatment plants, solid and hazardous waste disposal plants, bio-gas
plants, bio-fertilizer plants should be encouraged and financed by banks,’’ it added.
The banks should determine a set of achievable targets and strategies and disclose these in their
annual reports and websites for green financing and in-house environment management as well.

“The BB will award points to banks on management component while computing CAMELS
rating, where there will ultimately be a positive impact on overall rating of a bank,” it noted.

The central bank will declare the names of the top ten banks for their overall performance in
green banking activities on its website, the guidelines said, adding that it would actively consider
green banking activities/practices of a bank while giving permission for opening new bank
branches.

Products of Green Banking

1. Green Loans: means giving loans to a project or business that is considered

environmentally sustainable.

2. Green Mortgages: refers to type of mortgage that provides you a money-saving

discount or a bigger loan than normally permitted as a reward for making energy
efficient improvements or for buying a home that meets particular energy efficiency
standards.

3. Green Credit Cards: Be it in form of environmentally friendly rewards or using

biodegradable credit card materials or promoting paperless banking, credit cards are
going green.

4. Green Saving Accounts: In case of Green Saving Accounts, banks make donations
on the basis of savings done by customers. The more they save, the more the
environment benefits in form of contributions or donations done by banks.

5. Mobile banking and online banking: These new age banking forms include less
paperwork, less mail, and less travel to branch offices by bank customers, all of
which has a positive impact on the environment.

Other products of Green Banking includes:

6. Green checking accounts

7. Green CDs

8. Green money market accounts

9. Remote deposit (RDC)

10. Socially responsible projects